'The main objective of businesses is to provide services and goods to people and on the other hand, gain marginal profits from them. However, social, political, and economic situations usually become a hindrance to business prosperity. Many of the companies which are operating abroad must undergo licensing and certification procedures which are tough and must conform to their laws and regulations.'
Capstone Project: McDonald’s in India
In these tough financial times, many companies are facing challenges in expanding to new territories or shifting to new brands to give to their customers. One of those companies which are facing major crisis in the expansion is the McDonald’s food industry.
In recent times, the company has been forced to close its branches in New Delhi India because of many situations which had rendered it un-operational and unproductive. The main objective of businesses is to provide services and goods to people and on the other hand, gain marginal profits from them. However, social, political, and economic situations usually become a hindrance to business prosperity. Many of the companies which are operating abroad must undergo through licensing and certification procedures which are tough and must conform to their laws and regulations. According to Sarkar, (2017) this is what has made the Mc Donald’s to be prompted to close all its branches in New Delhi because most of their licenses for police and health had expired. The imminent closure of the businesses had thrown the food industry in India in disarray, and the workers therein had to make drastic measures to survive the impending closure.
The situation had been necessitated by the board of management of McDonald’s in North and East India. The first food chain in this region is run in a 50:50 joint venture which was led by the managing director Mr. Bakshi. However, that he is currently not the managing director of the food chain, but he had made up his mind not to sign documents which would lead to the renewal of licenses for the operation of the fast food chain in India (Singh, 2017). The reason given by Bakshi was that the food outlets where serving food to customers and it was not fit for them. The food was deemed unsafe and the fact that Mr. Bakshi had been unable to control the food supply in some of the food outlets in the country. This can be termed as a conflict of interest in the management of the food chain which led to one of the board members to withdraw support for the running of the food chain (Singh, 2017). This complaint by one of the board members formed the tipping point for the problems which were facing Mc Donald’s food chain in India. This is despite the other challenges which were affecting the food chain in the country.
The food industry in the world is very competitive and multinational companies are facing serious challenges to build and maintain a customer base. This situation has been challenging due to the emergence of other fast food joints such as KFC, King Burger, Domino Pizza and others who are indigenous to India such as Bikanervala and Haldirum (Sarkar, 2017). This shows that the food industry is very competitive and that each company must be innovative, creative and loyal to their clients for survival. Competition for customers in India is very fierce, with each of the food joint trying to be better than the others or creating a marketing niche to expand and be profitable. At the heart of every food joint, the is the food culture which is given to the customers. Therefore, customers have to sample and be confident that their food chain serves them the right kind of food they deserve.
The structural organization of these fast food joint in India is that there is collective ownership of the enterprises. This situation ensures that all of them have to agree on certain policies in the organization for it to operate. One of the basic functions of a board of management in any organizations to give directives for the operations therein. This is necessitating by the collective signing of papers for policies, joint responsibility, and other operational mechanisms. Therefore, according to Singh, (2017), the situation in the India was that there were massive structural failures after withdrawal of one of the stakeholder. The problem with joint ownership is that decision has to be collective agreed, and every member has to bear responsibility for what happens in the organization. Managerial structural failure was detrimental to the failure of the operation of fast food organization in India.
It is reported that Mr. Bakshi and other two managers had communication breakdown in the management of the organization notes Jagadeesh (2017). The problem which had led to this was that there were serious customer complaints that the food being served in some of the food joints was unsafe for human consumption. This situation drew the attention of health and police in India who were concerned with the well-being of the customers. This was either in the case that either he was to be prosecuted for operating illegally in India or due to the complaints of the consumers. Mr. Bakshi was the managing director, and therefore he was concerned about the situation of being prosecuted alone. This is because the foreign directors of the fast food joint in North and East India had claimed that they were not responsible for the daily operations of the fast food joints in the region (Jagadeesh, 2017). This would have then exposed Mr. Bakshi to prosecution alone despite having a chain of organizational structure in management.
The breakdown of management and managerial structural failure in the Mc Donald’s India had been a long-standing issue for some time. This is because there were reported financial issues at the beginning of management and therefore did not set up a good business background for the stakeholders. The 50:50 arrangement had been challenged on both sides of the stakeholders attempting to buy each other out. These moves were rejected by both parties at different times when they were tendered (Jagadeesh, 2017). Mr. Bakshi had then been ousted as the managerial director but then reinstated by the courts in Delhi. Then Mr. Bakshi was taken to the London Court of International Arbitration which ruled that Bakshi was to sell his joint venture at a reasonable valuation. This then brought an all blown war by the stakeholders that are Connaught Plaza Restaurants Ltd which is local to India and Mc Donald’s based in the united states (Jagadeesh, 2017). The friction between the two stakeholders in the venture resulted to the enterprise in India being closed.
Following these problems which have engulfed McDonald’s enterprise in India, the person who is affected by the changes which will be affected by the court is Mr. Bakshi. He is bound to lose his stake in the partnership which would render him profitless in the long run. His American counterparts will have a higher advantage if they are to buy out his partnership, because they have had long-running food joints in other parts of the world. The time of closure means that Mr. Bakshi has lost his proceeds which he had invested in the project in India. The business is also suffering because customers are changing their bases. Many of the customers in Delhi have switched bases and are frequenting KFC, Subway and Jumbo King (Singh, 2017). The feud takes a toll on the McDonald’s enterprise in India which makes customers not to trust it anymore. Complaints of foreign objects in foodstuffs have been reported from fingernails, fungus, worms, and lizards, which is something which is detrimental to the business’ trust with customers.
Therefore, to save the face Mc Donald’s with all these allegations of unsafe foods for human consumption, there are several equations which the partners should consider. The American counterparts should consider the effects of how the allegations will affect their customers regarding complaints of unsafe food. They should also consider if they were to drop their case at the United Kingdom court, will it save the food joints form imminent loss of trusted customers base? On the part of Mr. Bakshi, if he were to sell his stake to the company, will he be saved form possible prosecution due to subjecting of the public to unsafe foods? These are some of the critical consideration which both stakeholders at the company should consider if they were toosave the company from being closed completely by the government of India.
References
Jagadeesh, A. (2017). How Will McDonald’s Fare in India’s Burger Battle?. Knowledge@Wharton. Retrieved from http://knowledge.wharton.upenn.edu/article/will-mcdonalds-fare-indias-burger-battle/
Sarkar, J. (2017). McDonald’s to shut down 169 outlets in India. The Times Of India. Retrieved from https://timesofindia.indiatimes.com/business/india-business/mcdonalds-to-shut-down-169-outlets/articleshow/60166994.cms
Singh, R. (2017). Why McDonald's had to shutter outlets in Delhi. The Economic Times. Retrieved from https://economictimes.indiatimes.com/industry/cons-products/food/why-mcdonalds-had-to-shutter-outlets-in-delhi/articleshow/59402309.cms
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